Work from my laboratory over the previous funding period of this project has shown that mesenchymal/epithelial (M/E) induction, mediated by local signaling molecules including retinoic acid (RA), fibroblast growth factor 8 (FGF8), sonic hedgehog (Shh) and bone morphogenetic proteins (BMPs) is essential for morphogenesis and differentiation of the olfactory pathway during early development of the mammalian forebrain. Our observations raise an essential question: how does induction, mediated by specific molecular signals, influence the identity of specific cell classes in the developing olfactory pathway? To address this question we will evaluate the hypothesis that inductive signaling molecules, acting in the context of M/E interactions, regulate the generation and differentiation of olfactory pathway neurons via their action on molecularly distinct precursor cell populations. We will evaluate this hypothesis in two Specific Aims: the first includes experiments that assess the mechanisms of M/E inductive signaling for establishing precursor populations that give rise to olfactory receptor neurons (ORNs) in the olfactory epithelium, and the second addresses the role of M/E induction in establishing precursors of olfactory bulb interneurons (OBIs: including olfactory granule cells and periglomerular cells). We have developed several in vitro assays, complemented by in vivo approaches, to pursue these aims. Our experiments permit us to manipulate signaling via RA, FGF8, Shh and BMPs using either pharmacological approaches or genetic mutations that result in either loss or gain of function for each signal. Using these tools, we will assess the relationship between signaling via RA, FGF8 and BMP4 and the establishment of molecularly distinct ORN precursor populations as well as the acquisition of functional properties that characterize the mature ORN. In addition, we will evaluate the role of signaling via RA, FGF8, Shh and BMP4 in the context of M/E interaction for OBI development. We will examine the role of signaling patterning the expression of transcriptional regulators associated with OBI precursors in the lateral ganglionic eminence (LGE) as well as facilitating the specific migration of OBI precursors to the rudimentary olfactory bulb as well as their initial differentiation. The results of our experiments will permit us to define the specific contributions of several essential molecular signals to establishing two cell types that must not only be generated during early forebrain development, but that will continue to be generated and integrated into functional circuits from precursor populations that remain in the adult forebrain. Thus, our results will indicate how inductive signals act to define neuronal classes during initial development of a major functional division of the forebrain, the olfactory pathway, as well as how specific signals might contribute to the ongoing regeneration and repair of these forebrain neurons and circuits throughout life.